M2 Property Invest Ltd, Re

At the second stage of a cross-border merger, the court must apply the statutory scheme governing the respective stages of scrutiny. The court may rely on properly issued pre-merger certificates, subject to the unresolved question whether Article 10(2) makes them conclusively binding even where inaccuracies are suspected. The court need not ordinarily reassess creditor protection already entrusted to the national authorities at the first stage. Alternatively, where the court does examine creditor interests under Regulation 16, approval may be granted if the merger causes no material detriment to them. The court approved the merger because the certificates remained effective and the evidence showed no material prejudice to the relevant creditors.

M2 Property Invest Limited, an English parent company, applied under Regulation 16 of the Companies (Cross-Border Mergers) Regulations 2007 for approval of its proposed merger by absorption of its Polish subsidiary, Vendor Wind Service Sp. z.o.o. M2 would survive and Vendor Wind would cease to exist.

The applicants had obtained the English and Polish pre-merger certificates. Evidence later showed that Vendor Wind had resumed trading, its financial position had changed substantially, and the reports and information supplied to the authorities had been incomplete. The central issues were whether the certificates could be challenged, whether a Polish pre-merger certificate was a judgment for recognition purposes, and what scrutiny of creditor interests was required at the second stage.

1. Pre-merger certificates. The formal requirements of Regulation 16(1) were satisfied. The court was entitled to proceed on the basis that the English and Polish pre-merger certificates satisfied Regulation 16(1)(b) and (c). The inaccuracies identified in the materials would not have caused either authority to refuse its certificate, because the matters concerning Vendor Wind’s creditors were outside the relevant first-stage scrutiny.
2. Foreign certificate not a judgment. Applying Solo Kleinmotoren [1994] ECR I-2237, [1994] I.L.Pr. 457, the Polish certificate was not a judgment under the Recast Judgments Regulation. It was issued by a clerk verifying compliance with the Polish pre-merger process. There was no dispute between the merging companies on which the clerk ruled on her own authority. The court could therefore inquire into its validity.
3. Article 10(2). The court expressed the provisional view that the words “conclusively attesting” in Article 10(2) had a wide meaning and might require the second-stage court to accept the certificate even if it suspected error. It did not finally determine that issue, since the certificates would remain valid even if inquiry were permissible.
4. Creditor protection and Regulation 16. The court considered three possible approaches: examining all creditors, examining only creditors of the English transferee, or leaving creditor protection to the national law and first-stage procedures applicable to each merging company. The third approach appeared most consistent with the two-stage structure of Articles 10 and 11, mutual recognition, and the absence of a prescribed second-stage creditor-protection test. The court nevertheless held that, even on the broader approach in Re Diamond Resorts (Europe) Limited [2013] BCC 275, the evidence established that the merger caused no material detriment. M2’s creditors benefited from acquiring a solvent company, while Vendor Wind’s creditors had been informed of the merger and expressly raised no objection.
5. Order. The court approved completion of the merger. Under Regulation 16(2), the consequences were to take effect on 1 January 2018, more than 21 days after the order.

First instance decision. No appellate history is stated in the judgment.